Super Micro floods the market with $7 billion in new stock — short the dip on rising inflation fears
Super Micro Computer just announced a massive $7 billion stock sale to raise cash, causing its share price to sink. At the same time, inflation is running hot at 4.2%, leading bond traders to expect the Federal Reserve to hike interest rates sooner rather than later.
Idea
When a company sells billions of dollars of new stock, it floods the market with shares and usually pushes the stock price down. Super Micro is dealing with this heavy selling pressure right as the broader tech sector is dropping due to a hot 4.2% inflation report. With bond traders betting on Federal Reserve rate hikes to slow the economy down, expensive tech stocks are likely to face even more pressure. This double-whammy of a dilutive stock sale and a tough economic backdrop sets up a potential continuation of the downward slide.